What auction outcomes might raise competition concerns?

Ofcom’s first step is to consider the results of the auction that have detrimental effects on competition. For this Ofcom has to identify a number of dimensions to the potentiality of a credible national wholesaler that are affected by the quantity of spectrum it holds and how it affects other wholesalers including trade offs between them. Ofcom has made a provisional conclusion regarding to what combination of these dimensions is important for a wholesaler to be credible. For this purpose Ofcom considered the extent to which that a national wholesaler need to hold particular types and quantities of spectrum for delivering different quality dimensions. Ofcom also considered alternative approaches and mitigation techniques used by wholesalers, the technical advantages of holding particular spectrum portfolios, the importance of consumers and the importance of competition on particular types of capability.

Ofcom wanted to find out whether a national wholesaler can be considered credible in the circumstances where it fails to acquire additional spectrum in the auction. Ofcom concluded that there is concern that a category of national wholesalers may not be considered credible if Ofcom consider what additional spectrum they might require to be considered ‘credible’. This analysis helped the regulator to identify the sources of risk and it realized that a particular category of national wholesalers won’t be able to compete across wide range of services and customers.

Four dimensions of capability of a mobile service that are influenced by spectrum holdings have been identified by Ofcom basing on the responses received to the March 2011 Consultation. In the future this could be a deciding factor in assessing the credibility of a national wholesaler. The four dimensions of capability of a national wholesaler are 1) the capacity of the wholesaler and the average data rates it can provide 2) the quality of coverage it can deliver, 3) whether highest peak data rates could be provided immediately after the auction and in the long term and 4) whether services based on LTE technology could be offered immediately after the auction and for a long term.

Ofcom has assessed whether these capabilities are important to competition. For this purpose Ofcom considered the evidence available to it with regard to particular spectrum holdings which are necessary to have a certain capability or the availability of alternative ways of achieving it with out depending on a certain quantity of spectrum. For example whether the coverage advantages of sub 1 GHz spectrum in a micro-cell network could be substituted by using higher frequency spectrum by deploying small cells was considered by Ofcom as an alternative.

Ofcom also considered if any technical advantages relating to particular spectrum holding portfolio are likely to transform into a notable competitive advantage. The wholesalers’ capability and consumers’ valuation of the service were also taken into account in this regard.

For a number of reasons, this analysis holds no water. This analysis is based on uncertainties. The future capabilities of technology, prediction of consumers’ preferences and behaviour, complexity and wide variation of the actual world situations etc cannot be predicted with precision. Anyway based on the evidence available Ofcom is able to make some careful judgement about the future.